Foreign Ownership, Technological Intensities and Economic Performance of Automotive Parts Firms in India

Abstract

This contribution examines differences in technological intensities between foreign and local automotive parts firms in India. Foreign firms enjoyed higher labour productivity, wages, and export, technological and skills intensities than local firms. The econometric results showed a strong relationship between labour productivity and technological intensity. The technological intensity variable (including its components of human resource, process technology and R&D) was also strongly and positively correlated with skills intensity. Foreign ownership was only statistically significant and positive in the human resources regressions. Local firms also showed statistically significant levels of technological intensity (especially in process technology) when competing in export markets, suggesting that foreign firms may offer a competitive and complementary presence to spur local firms' development.

Keywords:

• Automotive parts, India
• exports
• local firms
• ownership
• technology

Notes

¹ Using a range of economies, Rasiah (2004a, 2004b, 2004c)showed that differences in technological intensities between foreign and local firms also varied with the level of institutional and systemic strength embedding firms.

² See Gujarati (1988).